The feasibility study is an instrument that serves to guide decision-making in the evaluation of a project and corresponds to the last phase of the pre-operational or formulation stage within the project cycle. It is formulated based on information that has the least possible uncertainty to measure the chances of success or failure of an investment project, based on it, the decision to proceed or not with its implementation will be made.
The feasibility study within the project cycle. Source: Miranda
The feasibility study within the project cycle. Source: Miranda
The feasibility study should lead to:
- Full and unequivocal determination of the project through market study, definition of size, location of facilities and selection of technology Design of the appropriate administrative model for each stage of the project Estimation of the level of necessary investments and their chronology / as well as operating costs and income calculation Full identification of financing sources and regulation of commitments to participate in the project Definition of contract terms and bidding documents for works for the acquisition of equipment and civil constructions main and complementary Submission of the project if necessary to the respective planning and environmental authorities Application of financial, economic, social and environmental evaluation criteria,that allows to gather arguments for the decision to carry out the project.
From the feasibility study it is possible to expect: o abandon the project due to not finding it sufficiently viable, convenient or opportune; or improve it, drawing up a definitive design, taking into account the suggestions and modifications that will arise from the analysts representing the alternative sources of financing, or from state planning officials at different levels, national, sectoral, regional, local or business. Consequently, the objectives of any feasibility study can be summarized in the following terms:
- Verification of the existence of a potential market or of an unmet need Demonstration of technical viability and availability of human, material, administrative and financial resources Corroboration of advantages from a financial, economic, social or environmental point of view of allocating resources towards the production of a good or the provision of a service.
Source: Miranda Miranda, Juan José. Project management: identification, formulation, financial-economic-social-environmental evaluation. MMEditores, 2005
